Strategy:10 - Forex Trading Information, Learn About Forex .

W. R. Booker & Co.Strategy:10Low-risk, high-return forex trading. 2003 Rob Booker. http://www.robbooker.comThe information contained in this document, although highly entertaining andquite instructive, might lead you to believe that tomorrow you’re going to be amillionaire. You are not going to be a millionaire tomorrow. Well that’stechnically not correct. Because you could be a millionaire already, in whichcase tomorrow you’re guaranteed to be one.

Strategy:10 – PAGEA bear chased two hikers.One hiker, while being chased,stopped to put on running shoes.As he was changing out of his hiking boots, his companion looked at him inhorror and exclaimed, “What in the world are you doing? You’ll never outrun thebear if you stop now!”Calmly, the other hiker said, “I don’t have to outrun the bear. I just have tooutrun you.”The forex market offers more opportunity for fast financial success – andfinancial ruin – than almost any other market. The get-rich crowd has always beenattracted to it. This crowd includes speculators, trading novices, retirees, andprofessionals looking for a way to get out of debt, increase the excitement in theirlives, or simply get rich really fast.These are the people who you will be taking money away from. These are thepeople who will be eaten by the bear. You don’t have to outrun the bear (the entiremarket). In fact, that’s impossible. You can’t beat the entire market. Those of youwho try will learn fast that the market has no mercy, can outrun anyone, and showsno mercy.I want to teach you how to run faster than the other traders.2

Strategy:10 – PAGEThe Four GroupsThere are four groups in the forex market. There are the novice traders –the greenies, the ones who try to outrun the bear and lose every time.In addition to the novice traders, there are three other levels ofparticipation in the forex market: the dealers, the institutional traders, and theadvanced traders.The dealers are the most powerful and they make the market, setting pricesand putting together deals.The institutional traders work in banks, wire firms, or governmentagencies. They trade huge amounts of money at a time, and the size of theirtrades gives them enormous power.Next, there are the advanced traders. This groupis comprised of people from all across the world,sitting in smaller investment firms, offices, or eventheir homes. You can be a part of this group. Insome cases, the advanced traders are the smartestgroup – trade for trade – than any other group.Because they don’t move a lot of money on eachtrade, they don’t have as much power as theinstitutional players. Because their trades are brokeredby the dealers, they’ll never have absolute trading power. But, because thereare so many novice traders – the advanced traders have plenty of people thatthey can outrun. Your goal as a forex investor is to aggressively take moneyout of the pockets of the novice traders.Don’t feel bad about that. Someone’s going to take your money along theway, and it’s going to teach you, very quickly, lessons that can only be learnedthrough failure. So, every time you take money from a novice trader, just3

Strategy:10 – PAGEremember: you’re teaching him a valuable lesson. After a while, you mighteven enjoy watching your hiking companion being eaten by the bear.The BasicsRead this – a great forex primer:http://www.forex.com/history forex.htmlOn the left navigation section, you'll see "Forex Pro Short Term TrendTrading". This is an essential read for you – even if it seems technical in nature, youshould read it anyway, just to get the information in your head one time. I suggestyou read everything on this link, start to finish. Getting a background in the markettakes about a week (at most), but it's very important for you to understand how thesystem works. The knowledge you gain early will pay off later. I didn't read this stuffBEFORE trading, and it actually kind of helps to read through the material whileyou’re entering and watching your first trades – because there’s nothing quite liketrading while you learn. Read the sections in "Forex Essentials". This is as clear anexplanation as exists.PipsOkay, now back to our program. To start, you have to understand what a"pip" is. A pip is the last number to the right in a currency. For example:If the EUR/USD traded at 1.1335 this morning. The "5" is the pip. If it moved to1.1535, which it did today, that would be a 200-pip move.The next concept that you need to understand is the concept of leverage.It’s a lot like margin in stock trading, only on steroids. It’s a simple concept.If you have 10,000 to trade with, your forex broker will let you borrow moneyfrom him so that you can trade in larger quantities. They will let you borrow4

Strategy:10 – PAGEas much as 400 times (400:1) what you put up in a trade. Most brokers allowbetween 50:1 and 100:1 margin. So, if you put up 1,000, and your brokerallows 100:1 margin, then you’ll be trading 100,000 worth of currency (insteadof 1,000).That’s important, because every pip equals a certain dollar amount. When youtrade 10,000, each pip movement equals 1. The chart below shows how itgoes from there.Amount Traded Per Pip 10,000 1 50,000 5 100,000 10 500,000 50 1,000,000 100 5,000,000 500If you trade 1,000,000 worth of currency, each movement would be equal to 100. So if you bought at 1.1445 and sold at 1.1545, you would make 100 x 100,or 10,000. Now, I don't know about you, but I could live off of that much.That's not saying, however, that you can make 10,000 per day. Of courseit's possible, but there are a lot of factors that make it very difficult. Like, howdo I know that it's going up or down?When should I get in a trade?Even more importantly, can you deal with the emotions of forex trading?Alan Farley, a trading expert, rightly observes that mastering the emotions oftrading is more difficult than mastering the technical skills. You’ll soon findout what he means by that.5

Strategy:10 – PAGEGreedMost traders in the forex market try to make a zillion dollars on every trade.They're greedy. This leads them to stay in a good trade, hoping to getmore money out of it. This can lead to disaster -- the trade can move againstthem and they get creamed. This happens all the time, and it still happens tome from time to time. It's the single greatest threat in trading. But you canalready understand why that's probably true. But how do you overcome greedwhen trading?RevengeThis is the other big one. A lot of traders get creamed in the market andthen want to strike back. So they double their last order and go for broke.This is natural, and I still deal with this emotion every day. The problemis, how does one combat this?Do not underestimate this emotion. It will drive you to ruin if you let it.The market is not your friend. The market is so much more powerful thanyou are. You cannot get “back at” the market. Trading when angry orvengeful will be a total disaster. If you get rocked on the market, then backup, take a deep breath, and talk to a mentor. Re-read the charts. Take abreak. Even if you think you see the best opportunity in the world after youget blasted – just take a break. There will be trades tomorrow.6

Strategy:10 – PAGEA Different Strategy.It’s as simple as this: I don't try to make a ton of money on each trade, and Inever try to get revenge. I’m not a scalper (someone who sits and makes 20-secondtrades for a few pips at a time).Instead, I set up good trades, that have a lot of potential, and then I shoot for 10pips. Just 10 pips. That’s it. I don’t let myself lose a lot of money. I only try to get10 pips, and if that’s all I get, then I’m out for the day. It's easy enough to get 10 pipsthat once that threshold is met, it's okay to get out. When you know that you canturn turn 10,000 into 130,000 in one year on 10 pips a day, it's no longer importantto strike back at the market or get greedy on one day of trading.And you can learn to turn 10,000 into 130,000 in one year on just 10 pips a day.Why is this innovative, different, or revolutionary? Because you are going to notonly take money from novices with this strategy, you’re going to take money fromother advanced traders. Advanced traders want big money. They didn’t spend yearslearning to trade so that they could make 200 a day. They want big, big returns.They go for 40 pips at a minimum. They are conservative with their trading capitalbecause the market can take BIG swings against them when they’re waiting for 40pips. Advanced traders think I’m nuts for getting out of a trade at 10 pips. What if itgoes to 40 pips? Won’t I be upset that I missed out?7

Strategy:10 – PAGENot at all. I’ll show you later how I can still make those 40 pips. But I’m neverdispleased with 10. First, though, I’ll explain stops and limits.Stops and LimitsA STOP is placed so that you don't lose too much money. For example, if Ibought EUR/USD at 1.1445, I would start losing money if it started moving down.So, I might set a STOP at 1.1425 -- meaning, if the currency drops to that level, thesystem AUTOMATICALLY exits the trade. I'm out 20 pips, but that's a lot betterthan being out 40 pips if it starts tanking really fast (and this happens all the time, asyou have seen).A LIMIT works the same way, only for gains. If I set my limit to 1.1535 on thatsame trade, then later in the day (or the hour), when the currency moves up to 1.1535,the system AUTOMATICALLY exits the trade, and I make money. This happenswhether I'm still at the computer, or down the street, or dead. THIS IS THE ONLYWAY TO TRADE IF YOU’RE NOT GOING TO BE PRESENT TO WATCHTHE TRADE.My system for trading relies heavily on three things:1. Technical analysis - a ½ hour, 3 hour, daily, weekly, and monthly chart.2. STOPS and LIMITS.3. 10-pip goal every day. This requires DISCIPLINE.If you started with 10,000 on January 1st, and earned 10 pips per day, and onlytraded 17 days of the month, then you would end the year 2,000 pips UP, and withabout 130,000.For a spreadsheet that details this system, write me atrob@robbooker.com.If you continued the next year with 10-pips per day, the next year you would bemaking between 10,000 and 17,000 per month trading (depending on your risktolerance). Can you do this? Absolutely. Can you do this today? Maybe, maybenot. You have to dedicate yourself 100% to learning how to trade intelligently.8

Strategy:10 – PAGEThe 7:10 Principles.1. Buy and sell on breakouts. I teach this in the 1 on 1 training, and Ido it myself.2. Stop trying to make 8 million on every trade.3. Set a 10-pip limit only. Exit the trade at 10. Exit the trade at 10.Stops are set based on market conditions, but are always set.4. Goal: 10 pips every day.5. If I earn more than 10 pips on a trade because the trade moves sofast in my direction, I can set my stop to protect the 10 and then gofor more. I like to teach traders to just start going for 10. There areadvanced strategies that go for more than 10, but we just start here.6. There is no ‘makeup’ strategy. If I take a loss, then I’m just tryingto end up with a 10 pip gain for the day. If I can’t get it, then Idon’t try for 20 the next day, or whatever. I can keep trying for the10 pips gain as long as I haven’t lost more than 5% of my capital.7. Time: I can trade for 5 hours per day, meaning I can have thetrading platforms open and sit at my computer for a max of 5 hoursper day. If I can’t earn my 10 pips during that time, then I can setmy stops and limits and walk away, but I can’t actively watch themarket any longer.9